PERRYSBURG, Ohio (February 6, 2024) – O-I Glass, Inc. (“O-I”) (NYSE: OI) today reported financial results for the full year and fourth quarter ended December 31, 2023.
Full Year 2023 Results
“I’m pleased to report strong 2023 performance as we successfully navigated softer macro conditions that developed over the course of the year including significant inventory de-stocking across the value chain. O-I continued to execute well through the fourth quarter and business performance moderately exceeded our expectations. As we concluded the year, strong net price and the benefit from our margin expansion initiatives helped mitigate the impact of softer demand and elevated production curtailment to balance supply with lower shipments,” said Andres Lopez, O-I Glass CEO.
“In addition to operating well in 2023, we continued to advance our long-term strategy. The benefit from margin expansion initiatives significantly exceeded our target with the strongest results in that program’s seven-year history. We made solid progress on our capital expansion program completing the first round of new capacity additions in Canada and Colombia, on time and on budget. Importantly, development efforts for MAGMA and ULTRA continued and our first MAGMA Greenfield project in Bowling Green, KY is on track to be commissioned in mid-2024. Our freshly updated ESG roadmap has been fully integrated into our strategy and long-term capital allocation plan as we advance glass as the most sustainable packaging solution. Finally, our balance sheet is in its best position in nearly a decade.”
“Building off our strong operating performance last year, O-I is well positioned to manage through current soft macro conditions that should improve as the year progresses. I believe the most challenging market conditions are behind us and we anticipate stronger future earnings as both sales and production volumes recover to pre-pandemic levels over time,” concluded Lopez.
Net sales were $7.1 billion in 2023, up approximately 4 percent compared to $6.9 billion in the prior year primarily due to higher average selling prices as well as favorable foreign currency translation. As anticipated, sales volume (in tons) was down 12 percent from the prior year mainly attributed to elevated inventory destocking across the value chain amid modestly softer consumer consumption.
Earnings before income taxes were $67 million in 2023, down from $805 million in the prior year mostly due to items management does not consider representative of ongoing operations which included a $445 million charge for impairment of goodwill in the company’s North America reporting unit in 2023 as well as a $334 million one-time gain on sales-leaseback transactions in 2022 that did not repeat. The goodwill impairment primarily reflected changes in macro conditions resulting in lower sales volumes and a smaller asset base following recent restructuring activities intended to improve long-term performance as well as the impact of a higher weighted average cost of capital on valuation given elevated interest rates. Earnings also reflected higher segment operating profit which was partially offset by elevated interest expense.
Segment operating profit was $1,193 million in 2023 compared to $960 million in the prior year.
- Americas: Segment operating profit in the Americas was $511 million compared to $472 million in 2022 and primarily benefited from favorable net price and margin expansion initiatives which were partially offset by the impact of lower sales volume and elevated operating costs mostly attributed to temporary production curtailments to balance supply with lower demand. Segment operating profit also benefited $12 million from favorable foreign currency translation.
- Europe: Segment operating profit in Europe was $682 million compared to $488 million in 2022 and primarily benefited from favorable net price and margin expansion initiatives. These benefits were partially offset by lower sales volume as well as higher operating costs due to temporary production curtailments to balance supply with lower demand. Segment operating profit also benefited $17 million from favorable foreign currency translation.
Retained corporate and other costs were $224 million, down from $232 million in 2022.
O-I reported a loss attributable to the company of $0.67 per share (diluted) in 2023, compared to earnings of $3.67 per share (diluted) in 2022.
Adjusted earnings were $3.09 per share (diluted) in 2023, exceeding management’s most recent guidance of approximately $3.00 per share (diluted) and compared to $2.30 per share (diluted) in 2022.
Cash provided by operating activities was $818 million in 2023 compared to $154 million in 2022 which included a $621 million one-time payment to fund the Paddock Trust and related expenses.
Free cash flow was $130 million in 2023, within management’s most recent outlook of $100 million to $150 million and compared to $236 million in the prior year. Free cash flow included elevated capital expenditures of $688 million in 2023 compared to most recent guidance of approximately $700 million and $539 million in 2022.
Total debt was $4.9 billion on December 31, 2023, compared to $4.7 billion at prior year end. Net debt was $4.0 billion compared to $3.9 billion in 2022.
Fourth Quarter 2023 Results
Net sales were $1.6 billion in the fourth quarter of 2023 compared to $1.7 billion in the prior year period as the benefit from higher average selling prices and favorable foreign currency translation partially offset a 16 percent decline in sales volumes (in tons).
The company reported a $439 million loss before income taxes in the fourth quarter of 2023 compared to earnings before income tax of $29 million in the prior year quarter. This decrease was mostly due to items management does not consider representative of ongoing operations which included the aforementioned $445 million charge for impairment of goodwill in the company’s North America reporting unit in 2023. Earnings before income tax also reflected lower segment operating profit and elevated interest expense.
Segment operating profit was $168 million in the fourth quarter of 2023 compared to $206 million in the prior year period.
- Americas: Segment operating profit in the Americas was $93 million compared to $83 million in the fourth quarter of 2022 as favorable net price and margin expansion initiatives more than offset lower sales volume and moderately higher operating costs. Segment operating profit also benefited $2 million from favorable foreign currency translation.
- Europe: Segment operating profit in Europe was $75 million compared to $123 million in the fourth quarter of 2022 as favorable net price partially offset lower shipment levels and significantly higher operating costs due to elevated temporary production curtailment to balance supply with softer demand. Segment operating profit also benefited $4 million from favorable foreign currency translation.
Retained corporate and other costs were $49 million, down from $66 million in 2022.
The company reported a loss attributable to the company of $3.05 per share (diluted) in the fourth quarter of 2023 compared to earnings of $0.08 per share (diluted) in the fourth quarter of 2022.
Adjusted earnings were $0.12 per share (diluted) in the fourth quarter of 2023, higher than management’s most recent guidance of approximately $0.03 per share (diluted) and compared to $0.38 (diluted) per share in the prior year quarter.
2024 Outlook
O-I expects 2024 adjusted earnings of $2.25 to $2.65 per share which should meet or exceed the company’s 2024 earnings target of $2.20 to $2.40 per share set during the last Investor Day in 2021. Results will likely be down from 2023, which represented O-I’s highest adjusted earnings in the past 15 years, as the company expects the benefit of low-to-mid single digit volume growth and the company’s robust margin expansion initiatives will partially mitigate the impact of lower net price and higher interest expense. While net price will likely decline in 2024, the company expects to retain 75 percent of the favorable net price realized over the prior two years. Furthermore, the company will benefit from strong operating leverage as sales and production volumes more fully recover to pre-pandemic levels over time.
O-I anticipates 2024 free cash flow will approximate $150 million to $200 million, an improvement from 2023 levels as reduced capital expenditures more than offset lower operating results and elevated tax and interest payments.
Guidance primarily reflects the company’s current view on sales and production volume, mix and working capital trends. O-I’s adjusted earnings outlook assumes foreign currency rates as of January 31, 2024, and a full-year adjusted effective tax rate of approximately 25 to 27 percent. The earnings and cash flow guidance ranges may not fully reflect uncertainty in macroeconomic conditions, currency rates, energy and raw materials costs, supply chain disruptions and labor challenges, among other factors.
Conference Call Scheduled for February 7, 2023
O-I CEO Andres Lopez and CFO John Haudrich will conduct a conference call to discuss the company’s latest results on Wednesday, February 7, 2023, at 8:00 a.m. EST A live webcast of the conference call, including presentation materials, will be available on the O-I website, www.o-i.com/investors, in the News and Events section. A replay of the call will be available on the website for a year following the event.
Contact: Sasha Sekpeh, 567-336-5128 – O-I Investor Relations
O-I news releases are available on the O-I website at www.o-i.com.
O-I’s first quarter 2024 earnings conference call is currently scheduled for Wednesday, May 1, 2024, at 8:00 a.m. EST.
